View: Housing affordability is at its peak; Indian realty now want buyer sentiment to stay positive

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At a time when housing affordability is probably at a record low level, any disturbance with the existing positive buyer sentiment may upset all plans of recovery for a sector that is arguably the biggest employment generating sector in India after agriculture.

View: Housing affordability is at its peak; Indian realty now want buyer sentiment to stay positive
When international rating agencies and think-tanks began to lower their growth projections for India in the aftermath of the second wave of the novel coronavirus spread in India starting April, the real estate industry in India had a reason to worry.
This industry, which was expecting some normalization of affairs after having undergone a great shock after the first wave in 2020, saw the impact of the economic upheaval having a rippling effect on homebuyer sentiment, too.
At a time when housing affordability is probably at a record low level, any disturbance with the existing positive buyer sentiment may upset all plans of recovery for a sector that is arguably the biggest employment generating sector in India after agriculture.
Buyer sentiment is central to real estate recovery
Aside from the fact that rates of residential properties have largely remained stable in the past half a decade, a low-interest rate regime (one can get a housing loan currently for an annual interest starting 6.65 percent), stamp duty cuts by states like Maharashtra and circle rate reductions by states like Delhi have increased housing affordability in India’s most active property markets.
Since the pandemic has made it acutely evident to buyers and investors that a roof over one’s head is the most durable asset one can have in the face of adversity, buyer sentiment toward housing ownership has also improved post the first outrage of the virus infection in India in early 2020.
In fact, in a survey by Housing.com in the September-December 2020 period, 43 percent of respondents opted for real estate as their preferred asset class. Fixed deposits and stocks were the second and third most popular investment choice among the respondents, claiming 21 percent and 20 percent votes in the survey, respectively.
It is pertinent to recall here that a negative buyer sentiment could be cited as the single-biggest reason if the residential sector in India had been reeling under the impact of a nationwide demand slowdown.
Aside from the fact that millennials, with their asset-light approach, prefer renting to housing ownership, large-scale project delays and rising number of developer insolvencies have had an adverse impact on consumer psyche, emotionally propelling them to keep their distance from the property market. The pandemic forced them to think otherwise.
That buyers continue to prefer property despite the monetary stress caused by the second wave of the pandemic is clear from the fact that half of the properties sold during the second quarter of the calendar year 2021, were sold in the month of June, when states began to relax travel restrictions as the caseload begun to shrink.
According to Real Insight (Residential) – April-June (Q2) 2021, a total of 15,968 units were sold across these eight markets during the June quarter. Keeping in view that most states have put in place fragmented lockdowns to contain the pace of the virus spread for the first two months, these sales numbers indicate the latent demand for property in India, the negative impact of the pandemic on the incomes of the buyer notwithstanding.
Another indicator that points towards the potential of some of India's housing markets to continue to have in the face of the pandemic is the value appreciation.
According to the report, the average values of new properties in markets like Ahmedabad and Hyderabad grew by 5 percent annually during the quarter, an indication that comparatively smaller cities have now become the focus areas for property investment.
Measures to boost buyer sentiment
While the Reserve Bank of India (RBI) continues to hold the repo rate at 4 percent and maintains an accommodative stance to support economic recovery, thus enabling a record low-interest rate regime, states have started to roll back stamp duty waivers to homebuyers, announced after the first wave.
Some states on the other hand have failed to come up with any measures to support buyer sentiment.
Considering the growth in the residential sector is central to India’s overall economic recovery, states must continue to support growth for property markets by either continuing previous measures or announcing new ones.
Any short-term losses to make this happen would eventually pay great dividends to enable faster economic growth for India as the world’s fifth-largest economy.
-The author is Group COO, Housing.com, Makaan.com and Proptiger.com